QUESTION 1

 During a meeting with your client, they ask if you have ever heard of the term ‘active ageing’ and what it means. As an experienced financial advisor, your client enjoys engaging with you on the latest developments in the industry and would like to ‘pick your brain’ on this buzz word. Provide a detailed explanation on what is meant by the term ‘active ageing’ as it relates to ageing populations.

QUESTION 2

Your client, Ms Iman Khan is assessing two different types of 4-year mutually exclusive investments. From her analysis she anticipates generating future end-of-year cash flows arising from each of the investment as follows:
Year Investment A, (CFs in AUD) Investment B (CFs in AUD)
0 -250 000 -130 000
1 35 500 30 000
2 35 000 42 500
3 18 500 39 000
4 450 000 160 500
The applicable discount rate for both these two investments is 15%.
2.1 Calculate the Net Present Value (NPV) and Internal Rate of Return (IRR) of both investments A and B. (4)
2.2 It is often considered best practice to use more than one investment criterion/technique to evaluate investment opportunities. Discuss two reasons why it is important to make well-informed and accurate investment decisions. (2)
2.3 Which investment criterion (technique) is considered the best criterion to follow? Explain your answer. (2) 2.4 Which investment would you advise your client to proceed with? Motivate your answer.

QUESTION 3

You have been approached by a new client, Mr Dave Darlinghurst to prepare his 2022 income tax return. Dave has just commenced employment as a teacher and his first year’s income was $75,000 in the 2021/2022 financial year. He also receives bank interest of $1500. His expenses consist of $800 of subscriptions to the Teachers Association and donations of $300 to an approved charity.
3.1 Calculate Dave’s gross tax payable. (5)

3.2 Calculate Dave’s 2022 net tax payable / refund. (5)

QUESTION 4

 Consider the data for shares SUPER (S) and DOUBER (D). SUPER is an electronics company, whereas DOUBER is a debt counseling and collecting company. The expected return for share SUPER is 2.55% and for share DOUBER is 5.05%. The standard deviation of share DOUBER is 17.86% and the correlation coefficient between the two shares is -0.9591. State of the Economy Probability of the economic state occurring (Pi) Rate of return of SUPER (RS) if the economic state occurs Rate of return of DOUBER (RD) if the economic state occurs Recession 0.30 -13% 32% Normal 0.45 6% -4% Strong growth 0.25 15% -11% Investment amount $108 000 $72 000
4.1 Calculate the risk of share S only. Show the relevant equation. (3)
4.2 Calculate the expected return of a portfolio consisting of share S and share D. (3)
 4.3 Determine the expected total risk of this portfolio comprising of share S and share D. (3)
4.4 Would it be a good idea to combine these two shares in a portfolio? Motivate your answer by referring to the risk of the two shares, the risk of the portfolio and the correlation between the two shares within the portfolio. (2)
4.5 You want to invest in only one of the shares, that is either share S or share D. Which share should you choose if you want the share with the lowest risk-per-unit of return? (4)

QUESTION 5

According to a report by The Australian Children's Education and Care Quality Authority (2012), “there are many situations which may cause families to become vulnerable. These situations may be brief, depending on the ability of families to deal with and recover from these stresses or they may be ongoing.” Some of the factors that can cause families to become vulnerable include poverty, poor health (physical and mental), and homelessness. In 2020, it was found that 3.24 million Australians are living below the poverty line. The poverty line works out to be approximately $457 a week for a single adult living alone; or $960 a week for a couple with 2 children (Davidson, Saunders, Bradbury & Wong 2022). Microinsurance is receiving attention as a market-based solution for economic inclusion and risk management in low-income households. Provide an overview of the microinsurance landscape in Australia and discuss how it can assist with overcoming financial difficulties for those living in vulnerable circumstances. (5)

USEFUL SOURCES
https://corporatefinanceinstitute.com/resources/knowledge/finance/internal-rate-return-irr/http://
Davidson, P., Saunders, P., Bradbury, B. & Wong, M. (2020). Poverty in Australia 2020-part 1: overview. Available online at: https://povertyandinequality.acoss.org.au/wpcontent/uploads/2020/02/ Poverty-in-Australia-2020_Part-1_Overview.pdf [Accessed 02 August 2022]. The Australian Children's Education and Care Quality Authority (2012). Supporting Vulnerable Families. Available online at: https://www.acecqa.gov.au/sites/default/files/2021- 01/SupportingVulnerableFamilies.PDF [Accessed 02 August 2022].